Private Equity Recruiting is Bananas

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M*therf*ckers Have Lost Their G*d-damned Minds

There is so much to unpack in this stupid piece about the annual private equity recruiting frenzy. First, let's stop calling kids who are weeks out of college "talent" merely because they got a job in an investment bank trainee program. They haven't proven that they're talented at anything just yet. Going to an ivy league school, having a trust fund and being a douche isn't dispositive of anything. So, everyone chime the f*ck down please. Second, these folks get paid $200k? And people say there's no wage inflation? Third, the idea that an ibanker trainee is going to be appreciative for the two years of training a bank has given them and, in turn, give later private equity business to said bank is ludicrous. As a practical matter, his/her connection to that bank lasts a mere few weeks prior to them securing the next bigger, better and more Tinderable gig with which they prefer to identify. This seems like an outdated model with bad assumptions baked into it. The only sure thing seems to be that no matter which one of the PE firms these trainees land at, they'll be hiring Kirkland & Ellis LLP as bankruptcy counsel for one of their busted portfolio companies. Fourth, we love this bit about recruiting being earlier than ever "after an agreement to hold back fell apart." Hahahaha. So, private equity firms - KNOWN FOR DEAL-MAKING - couldn't even come to a deal amongst themselves?? This is like mutually assured destruction among KKR, Warburg Pincus, Carlyle Group LP, Apollo Global Management LLC, Bain Capital, Blackstone Group LP, TPG and Golden Gate Capital. Here's a great idea: lets trip over ourselves - and each other - to hire people with literally "no work experience." Those interviews must be PAINFUL AF. And, oh, hey you Managing Director. We love that you're "often forced to cancel business meetings last-minute to interview candidates." We're sure a multi-billion dollar transaction can wait for some piss-ant Harvard bro who inexplicably and unnecessarily writes equations on glass to regale everyone with his rad math skills. So lit. On what basis are these kids REALLY getting hired then? We think its probably pretty obvious. And its questionable how this BS still flies. What does any of this have to do with disruption? Well, when you're competing with venture capital and tech to acquire "talent," desperate times seemingly call for desperate measures. Logic has been disrupted. And it's absurd.

Private Equity (retail, no mas)

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Apparently they've finally gotten the memo on retail (although, as we have well covered, the PE shops seem to be doing okay even while driving their portfolio companies into bankruptcy...but we digress): investments in retail companies are down markedly to 86 globally in 2017 as compared to 300 in each of '15 and '16. Speaking of private equity and retail, gotta love the timing behind the departure of TPG Capital's sole female partner given David Bonderman's ill-timed and inappropriate comments in the Uber boardroom. Notably, one noted potential cause for the separation is that heads needed to roll for the terrible J.Crew investment.

Notable (Goldman Sachs, Intelsat, Linn Energy & Goodwill Stores)

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Goldman Sachs. Everyone loves to hate on them. Oh, and Venezuela ($GS). Pssst: there are several others in the trade too.

Intelsat ($I). There goes that Softbank thing. The merger didn't get enough creditor support. 

Linn Energy. The recently restructured company offloaded its Jonah and Pinedale fields and surrounding area to Jonah Energy, a platform formed by TPG Capital. For $580mm. 

Lunch. Short it. And the casual dining spots that serve it, e.g., Ruby Tuesday Inc. ($RT)

Ocwen Financial. Nothing like the "Strippers Defense" to ward off scrutiny ($OCN).

Retail. File this one under unintended consequences. It appears that Goodwill - yes, that Goodwill - is also falling victim to online shopping and is committed to downsizing its brick-and-mortar footprint and restructuring some operations. Someone on this newsletter should think about this as a potential pro bono project.

News for the Week of 3/5/17

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  • Coal. Post-reorg players like Arch Coal are now trying to take advantage ofgovernment subsidy (which reeks of buyside "value-realization"): query what this means for alternative energy players who already receive such subsidies and are rumored to be under siege by the Trump administration...?
  • Environment. We wrote a few months ago about Oklahoma and the apparent correlation between wastewater disposal and an uptick in seismic activity. The seismic-hazard warning for Oklahoma in 2017 is "still significantly elevated."
  • Golf & Sexy Time. There's zero correlation: we just thought it was a funny combination. That said, tough times for TaylorMade (owned by Adidas and apparently being shopped by Guggenheim Securities). Meanwhile, Agent Provocateur sold while in UK "administration" to an affiliate of Sports Direct (which also recently surfaced as the stalking horse bidder in Eastern Outfitters). AlixPartners was the administrator.
  • Legal Profession. Short big firm junior lawyers.
  • Power. This is an odd report on Westinghouse. 
  • Retail. We're getting a little sick of sounding like a broken record but Best Buy and Target reported numbers this past week and then saw massive stock drops due to weak guidance. And Barnes & Noble got DECIMATED after reporting numbers. The good news is that the coloring fad appears to be over. Meanwhile, the tech barrage shows no signs of abating: GameStop came under pressure this week after Microsoft announced its subscription gaming service. Is GameStop an immediate near term restructuring candidate? No, but part of the value we provide is highlighting for you where future pain points are hiding and without sounding TOO dramatic, this could be the beginning of the end.
  • Retail II. We're nerds and so we found this analysis of when to close retail stores interesting. And we're curious to know if any of our advisory readers agree with this...LET US KNOW. Speaking of closing retail stores, Abercrombie will close 60 stores, Crocs will close 160 stores, and looming bankruptcy candidate hhgregg is closing 88 stores (which briefly sent Best Buy's stock north back up, despite earnings). Meanwhile, Neiman Marcus hired Lazard for balance sheet help and Radio Shack 2.0 (aka General Wireless Operations) is rumored to be Radio Shack chapter 22.0.  
  • Tech. Rough week for Uber. Choice quote: "Before too long, Uber's cash will run out. And if Uber hasn't built a viable self-driving car by then, the results won't be pretty."
  • Telecom. Wow, Intelsat, bailed out? 
  • Fast Forward: Seadrill Ltd. noted the possibility of a bankruptcy filing, sending the stock into a tizzy. Still, John Fredriksen quickly highlighted his history of no default. Related, Pacific Drilling also noted in its earnings call that Chapter 11 is possible. 
  • Rewind I: A lot of folks have been sleeping on tech bankruptcies, but NJOY was a hardware bankruptcy from last year that now has a resolution: Mudrick Capital seeks to turn the company around, operating it like a PE-owned company rather than a VC-funded company. Speaking of which, Cirque du Soleil got a workover by TPG Capital (and AlixPartners) and now there's this YouTube promotional video to show for it. Speaking of purchases out of bankruptcy, it seems a Canadian retail player made the first move on Wet Seal only to be outflanked by Gordon Brothers.
  • Rewind II: Soundcloud looks increasingly like it will be in the busted tech bankruptcy bucket. IP sale?
  • Chart of the Week: 
  • Tweet of the Week: This is great because it doubles as a second chart of the week: we're so creative. Anyway, we hate to say we told you so but, effectively,we told you so: we'd love to know why nearly 200 companies felt the need to reference AI in their earnings reports...